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Lecture 53

ECON 1010 Lecture 53: Lecture 53

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ECON 1010
Laura K.Brown

lc78 1. The reason for this inefficiency is that the market equilibrium reflects only the private costs of production 2. We can measure the value of this increase in economic well-being using the concept of deadweight loss 3. Deadweight loss was the reduction in total surplus that resulted from the imposition of a tax or tariff 4. The same approach can be used to measure the reduction in total surplus associated with the inefficient allocation of resources due to the presence of an externality 5. The equilibrium quantity is Q-market and the price is P-market 6. In the case of a negative externality in production, the increase in producer surplus of moving from Q-market to Q-optimum, measured using the social cost curve, exceeds the reduction in consumer surplus 7. Deadweight loss is the triangle with the difference between the social cost curve and the demand curve at the equilibrium level of production (Q-market) 8. The height of the social cost curve in the presence of a negative production externality incorporates the sellers private costs of production plus the costs imposed on others due to t
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